Retailer keeps top job in store

One of
David Jones
’s most senior and long-serving executives, 45-year-old stores and operations general manager Paul Zahra, has taken over as chief executive.

The David Jones board moved swiftly to limit the upheaval created by the shock departure of
Mark McInnes
, arguably the most successful leader in recent history of the 170-year old retailer. The rest of the senior management team will remain intact.

“As far as I am concerned it’s business as usual," Mr Zahra said.

“The board has acted to stabilise the company in these difficult circumstances.

“My priority as the new CEO is to focus on the business and ensure a smooth transition."

Chairman Bob Savage said as the department store market in Australia was small, if David Jones had not appointed from within it would have had to go overseas.

“Our metrics from a business point of view are among the best in class of department stores worldwide, and as such I didn’t really see that a protracted process of going through looking for an external candidate was in the best interests of shareholders and would have added to the destabilisation we were anxious to avoid," Mr Savage said.

Mr Zahra was appointed because of his depth of experience at David Jones and at retailers such as Myer and Target.

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In his 28 years in retailing he has spent 12 years at David Jones in a range of roles including buying, visual merchandising, customer service, supply chain and store refurbishments.

He was part of the senior team that orchestrated David Jones’s turnaround strategy in 2003, which included the sale of underperforming stores and the introduction of new brands, and helped develop and implement the 2009-12 strategic plan.

“It’s a privilege and an honour for me to be appointed chief executive of David Jones," Mr Zahra said.

But some investors are asking why long-serving finance director Stephen Goddard or general manager fashion, accessories and cosmetics, Collette Garnsey,were not considered for the top job.

Mr Goddard, a CEO candidate in 2002-03, said he had recommended Mr Zahra.

“In my view Paul Zahra is an exceptionally talented retailer with a great track record, and in that way he can add enormous value to the company," Mr Goddard said.

“I feel I can add real value to the company through rigorous financial management – I’ve shown that over a long period of time – and our intention is to demonstrate for the next little period of time that we can also do that in future,’ he said. “The quality of the management team will pull us through this."

Still, Mr Zahra will have to work hard to convince investors that there will be no loss of momentum following Mr McInnes’s sudden departure.

David Jones shares were trading at 98¢ when Mr McInnes took the helm and closed yesterday at $4.49.

In an email to staff, Mr Savage said Mr McInnes had behaved “in a matter unbecoming of a chief executive" but implored staff to respect the privacy of the employee involved in the incident and not to “add fuel to the fire" by gossiping.

Citigroup analyst Craig Woolford said Mr Zahra had played a major role in the cost reduction program and welcomed his appointment.

“The swift action of the board to address the issue and replace Mr McInnes with current internal senior management is notable," Mr Woolford said.

“We expect some brand damage but it will be short-lived and the company’s earnings will benefit from a reduction in CEO remuneration."

Mr McInnes earned about $7 million a year; Mr Zahra may earn less than half that.

But broker Merrill Lynch said Mr McInnes was “integral to the highly energetic culture and cohesive fabric of David Jones" and was concerned that in the short term “the company could lose its way".

Tribeca Investment Partners portfolio manager Sean Fenton said the shares had shed only 2¢, showing investors were confident DJs would remain on track.

“Mark would be one of the more highly regarded CEOs in the market, he’s done a great job turning the company around and driving the profit forward in a reasonably solid fashion through some pretty volatile retail conditions, so he’s certainly a loss to the company but they have a reasonably deep management team and I’m pretty comfortable things will stay on track," Mr Fenton said.

David Jones affirmed its forecast for second-half earnings to rise as much as 10 per cent and said the first two weeks of clearance sales had gone well.